Peterson v. Cellco Partnership

• Decision Date: 26 June 2008
• Docket Number: No. G038728.,G038728.
• Citation: 164 Cal.App.4th 1583,80 Cal. Rptr. 3d 316
• Court: California Court of Appeals Court of Appeals
• Parties: TROY PETERSON et al., Plaintiffs and Appellants, v. CELLCO PARTNERSHIP, Defendant and Respondent.

164 Cal.App.4th 1583

80 Cal. Rptr. 3d 316

TROY PETERSON et al., Plaintiffs and Appellants, v. CELLCO PARTNERSHIP, Defendant and Respondent.

No. G038728.

Court of Appeals of California, Fourth District, Division Three.

June 26, 2008.

Callahan, McCune & Willis, Robert W. Thompson and Douglas A. Wright for Plaintiffs and Appellants.

Jones Day, Thomas R. Malcolm, Marc K. Callahan and Edward S. Chang for Defendant and Respondent.

OPINION

IKOLA, J.

Plaintiffs Troy Peterson and Michael Jackson appeal from the judgment dismissing their case with prejudice after the court sustained the demurrers of defendant Cellco Partnership, doing business as Verizon Wireless, to plaintiffs' (1) unfair competition cause of action under Business and Professions Code section 17200 et seq.¹ (UCL) in their second amended complaint, and (2) unjust enrichment cause of action in their third amended complaint.² For the reasons explained below, we conclude the court properly sustained, without leave to amend, defendant's demurrer to (1) plaintiffs' UCL claim because plaintiffs failed to allege sufficient facts to support their standing to bring the claim, and (2) plaintiffs' unjust enrichment claim because it was based on alleged Insurance Code violations for which no private right of action exists and because plaintiffs received the benefit of the bargain.

FACTS

In their second amended complaint, plaintiffs brought a class action against defendant alleging five causes of actions, including claims for unfair business practices under the UCL and unjust enrichment. Plaintiffs alleged that (1) defendant "is a communication equipment vendor pursuant to ... Insurance Code section 1758.69"; (2) defendant offered and sold communication equipment (such as cell phones) and related insurance policies; (3) plaintiffs purchased cell phones and insurance from defendant; and (4) a percentage of each insurance premium paid by defendant's customers "was retained ... or received by defendant as a fee ... or monetary benefit to defendant from the ... insurance provider." Plaintiffs further alleged defendant lacked a license (required under Insurance Code section 1758.6) to offer or sell such insurance.

In their UCL cause of action, plaintiffs alleged defendant violated the UCL by, inter alia, offering and selling insurance while unlicensed to do so. Plaintiffs alleged they had standing to bring the claim because (1) they "suffered injury in fact because defendant ... unlawfully retained ... or received a percentage of the ... insurance premiums paid by plaintiffs as a fee, monetary benefit ... or recurring revenue stream, all of which plaintiffs have a legally protected ownership interest in that is concrete, particularized and actual"; (2) they "lost money" because defendant retained a percentage of the premium and the money was "no longer in plaintiffs' possession"; and (3) they "suffered injury in fact and lost money to defendant as a direct result of defendant's unlawful activities because if defendant had not offered [and] sold ... insurance when it was not... licensed to do so, plaintiffs would not have purchased the ... insurance from defendant."

In their unjust enrichment cause of action, plaintiffs alleged defendant was "unjustly enriched by its receipt ... or retention of the fee, monetary benefit ... or recurring revenue stream because defendant did not maintain the required license to offer ... or sell the ... insurance and was not lawfully entitled to receive ... or retain any percentage of the ... insurance premium ...."

Plaintiffs prayed, inter alia, for restitution of all funds acquired by defendant in violation of the UCL and "of all ill-gotten gains that have unjustly enriched defendant at the expense of plaintiffs."

Defendant demurred to the second amended complaint, arguing, inter alia, plaintiffs' UCL claim failed to state facts sufficient to constitute a cause of action because (1) under Proposition 64, "only a private plaintiff who `has suffered injury in fact and has lost money or property as a result of such unfair competition' may bring a" UCL claim, (2) plaintiffs' allegation that defendant "received a percentage of the [insurance] premium as a commission" "in no way shows that Plaintiffs incurred monetary loss, and therefore does not satisfy the standing requirements of Proposition 64," and (3) plaintiffs lacked "standing because the allegations of the complaint show that plaintiffs received the benefit of the bargain and have not lost money." Defendant asked the court to take judicial notice of the official voter information guide to Proposition 64. As to plaintiffs' unjust enrichment claim, defendant's demurrer alleged plaintiffs failed to state facts sufficient to constitute a cause of action because plaintiffs received the benefit of the bargain and could not seek a windfall under the guise of restitution.

The court granted defendant's request for judicial notice and sustained, without leave to amend, the demurrer to plaintiffs' UCL cause of action because plaintiff had "been repeatedly unable to state facts supporting the legal requirement of actual injury and pecuniary loss as required by Proposition 64."³ The court overruled defendant's demurrer to plaintiffs' unjust enrichment cause of action.⁴

Defendant subsequently moved for judgment on the pleadings on plaintiffs' unjust enrichment claim in the second amended complaint—plaintiffs' "single remaining theory"—arguing, inter alia, the cause of action (1) was subject to Proposition 64's requirement that a private plaintiff have lost money and have suffered injury, and (2) was based on "alleged violations of insurance licensing statutes" for which there is no private right of action. The court granted the motion with leave to amend, relying on cases holding that no private cause of action exists for such violations of the Insurance Code.

Plaintiffs then filed a third amended complaint alleging solely an unjust enrichment cause of action, once again relying on Insurance Code section 1758.6's prohibition against a communications equipment vendor offering or selling insurance without a license, and claiming defendant was "unjustly enriched by the payment of the fee, commission, profit ... or other form of monetary benefit because defendant... was not authorized to receive ... or accept [such payments] as a result of the offer, sale ... or transaction of communication equipment insurance [and] failed to maintain the proper license ...."

Defendant demurred to the third amended complaint, arguing the claim was "still fundamentally grounded in alleged violations of the Insurance Code." Defendant contended the "Legislature delegated enforcement of the Insurance Code statutes governing communication equipment vendors to the Insurance Commissioner and chose not to create a cause of action for private plaintiffs." Defendant further argued plaintiffs could not "evade the Legislature's decision not to allow a private cause of action simply by omitting some references to some statutory citations, while still invoking the substance of those statutes."

The court sustained, without leave to amend, defendant's demurrer to plaintiffs' third amended complaint, stating: "The claim for unjust enrichment is based upon violations of the Insurance Code for which no private cause of action exists." The court dismissed plaintiffs' action with prejudice.

DISCUSSION

Standard of Review

In evaluating a trial court's order sustaining a demurrer, we review the complaint de novo to determine whether it contains sufficient facts to state a cause of action. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [216 Cal.Rptr. 718, 703 P.2d 58].) In doing so, we accept as true all properly pleaded material facts, as well as facts that may be implied from the properly pleaded facts (Montclair Parkowners Assn. v. City of Montclair (1999) 76 Cal.App.4th 784, 790 ), and we also consider matters that may be judicially noticed (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6 [40 Cal.Rptr.3d 205, 129 P.3d 394]). We do not assume the truth of contentions, deductions or conclusions of fact or law. (Ibid.) The plaintiff "bears the burden of demonstrating that the trial court erroneously sustained the demurrer as a matter of law" and "must show the complaint alleges facts sufficient to establish every element of [the] cause of action." (Rakestraw v. California Physicians' Service (2000) 81 Cal.App.4th 39, 43 .) "Because standing goes to the existence of a cause of action, lack of standing may be raised by demurrer ...." (Buckland v. Threshold Enterprises, Ltd. (2007) 155 Cal.App.4th 798, 813 .)

The Court Properly Sustained Defendant's Demurrer to Plaintiffs' UCL Claim

Plaintiffs contend their second amended complaint "alleged facts sufficient to establish standing to bring their UCL claims," arguing (1) their alleged payment of an "unlawful commission ... represents a distinct and palpable `injury in fact' sufficient to provide standing for their UCL claims"; (2) they alleged "facts showing they lost money as a result of [defendant's] illegal business practice"; and (3) they "alleged facts demonstrating the causal connection between [defendant's] unlawful business practice and the `lost money.'" Alternatively, they argue "that a violation of the ... Insurance Code creates a cause of action for unfair business practices."

(1) The UCL prohibits, inter alia, "any unlawful, unfair or fraudulent business act or practice ...." (§ 17200.) In order to give substance to this prohibition, a UCL action "`"borrows" violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices ....'" (Farmers Ins. Exchange v. Superior Court (1992) 2 Cal.4th 377, 383 [6 Cal.Rptr.2d 487, 826 P.2d 730].) Here, plaintiffs' UCL claim was predicated on allegations defendant violated the Insurance Code by selling cell phone insurance without a license.

(2) The court sustained defenda...